Board Once Again Ignores Data Calling for Higher Increases
Although there were concerns that the City Rent Guidelines Board (RGB) would enact a fourth rent freeze in the last eight years, critical arguments made by RSA, as well as strong testimony from RSA members, thwarted any plans for a parting gift from pro-tenant Mayor Bill de Blasio.
On June 23rd, the RGB voted in favor of partial rent increases that are meant to address increased operating expenses for building owners and to assist tenants who are still dealing with the financial impact of the COVID-19 pandemic. The approved guidelines under RGB Order No. 53 are as follows:
One-year lease: 0% for the first six months, 1.5% increase for the last six months
Two-year lease: 2.5%
A Special Guideline for decontrolled apartments equal to Maximum Base Rent (MBR) + 39%
A 0% increase for all classes of hotels, rooming houses and Single Room Occupancies (SRO’s)
Please be advised that as a result of clarification issued by HCR in late 2019 with regard to the Housing Stability and Tenant Protection Act (HSTPA), as well as advocacy from RSA, these guidelines will apply to both renewal and vacancy leases. The guidelines will go into effect for leases commencing October 1, 2021 through September 30, 2022 (see page 4 for more information).
The motion for these rent guidelines was put on the table by Public Member Alex Schwartz and passed by a vote of five to four. Owner Members Robert Ehrlich and Scott Walsh had put a motion forward for a 2.75% increase for a one-year lease and a 5.75% increase for a two-year lease. That motion was defeated seven to two.
Because the COVID-19 restrictions continued to have a negative impact on New York City tenants heading into this year’s deliberations in April, it was assumed that Mayor de Blasio would once again directly intervene in the process as he had done so last March when he urged the Board to freeze rents at the height of the pandemic. Surprisingly, the Mayor never took a public stance on this year’s guideline process and the rental housing industry was able to make convincing arguments against consecutive rent freezes.
Over the course of three months, not only did RGB staff data justify rent guideline increases, but New York State’s gradual lifting of pandemic restrictions, improved economic and employment data, generous government financial assistance for tenants over the last 15 months, and the lack of financial relief for building owners, put the Board in a precarious position where anything short of rent increases would be completely unjustifiable.
Aside from these factors, the Board Members could not avoid the fact that they deliberately ignored last year’s data and succumbed to political pressures that resulted in an historic third rent freeze in seven years. Last year’s RGB research reports showed not only another increase in the Price Index of Operating Costs (PIOC), but the first decrease in Net Operating Income (NOI) in nearly 20 years, a direct result of prior rent freezes and inadequate guidelines. This data was the recipe for the highest guideline increases under the de Blasio Administration, but the Board was able to conveniently sweep that data under the rug in the interest of approving another rent freeze at the request of Mayor de Blasio.
Throughout the deliberations this spring, RSA made sure that last year’s data was not forgotten. In addition, through invited testimony, a detailed 27-page submitted report to the Board, and frequent meetings with Board Members, RSA highlighted various economic factors that owners have faced over the course of the last two years, such as the enactment of the most anti-owner rent laws in State history, the negative financial impact of the pandemic, and the Legislature and City Council’s failure to provide much-needed relief to building owners.
As these arguments began to resonate, RSA members and other stabilized property owners throughout the City provided convincing testimony during virtual public hearings on June 15th and June 17th. Rather than discuss all of the protections that tenants have received over the course of the last 15 months, these building owners told their own stories about the impact of the pandemic, the HSTPA, and past inadequate guidelines on their ability to provide safe and adequate housing for their tenants.
Although we advocated for much higher rent increases, the partial increases approved by the RGB provide a clear indication that the plight of rent-stabilized property owners resonated with Board Members this year. Testimony from RSA members had a direct impact on the outcome of this year’s deliberations and we commend all of you who took the time to tell your stories this year.
There is no denying that Mayor de Blasio made the RGB process a political one over the last eight years, prioritizing a dramatic shift to pro-tenant ideologies. City Hall’s direct involvement in the deliberation process made our efforts to fight for reasonable and justified rent guideline increases that much more difficult. As we went to press, we were still unsure of who the next Mayor of New York City would be. However, we hope that the next Administration returns to a 45-year precedent that existed before the current Administration, which allowed the RGB to act independently of City Hall and to follow its own mandate to balance the needs of both building owners and tenants.
Based on the term lengths of the current Board Members, the next mayor could appoint as many as seven new Board Members next year, including a new Chairperson. We look forward to working with these prospective new appointees during next year’s deliberations as we make our case for long-overdue and adequate rent increases.